Banks fail to pass on full interest rate cuts
PSX loses 289.43 points to close at 34,186 points
Pakistan Stock Exchange (PSX) Monday noted bearish trend as KSE 100 index went down by 289.43 points (0.84%) to close at 34186.26 points.
A total of 137,932,650 shares were traded compared to the trade of 287,100,690 shares during the previous day, whereas the value of shares traded during the day stood at Rs4.799 billion compared to Rs10.566 billion during last trading day.
Out of 371 companies, share prices of 103 companies recorded increase, 244 companies registered decrease whereas24 companies remained stable in today's trading. The three top traded companies were WorldCall Telecom with a volume of 14,251,500 shares and price per share of Rs 1.11, TRG Pak Ltd with a volume of 11,608,500 and price per share of Rs 16.79 and Lotte Chemical with a volume of 9,703,500 and price per share of Rs 16.07.
The top advancer was Rafhan Maize with the increase of Rs325.5 per share, closing at Rs 6835.5 while Unilever Foods was runner up with the increase of Rs305.98 per share, closing at Rs6425.95. The top decliners were Bhanero Tex with the decrease of Rs43.66 per share, closing at Rs850.01 and Pak TobaccoXD with the decrease of Rs21 per share closing at Rs2399.
Australia's big four banks face a new inquiry over their failure to pass on in full official interest rate cuts engineered by the central bank.
The treasurer, Josh Frydenberg, has asked the competition watchdog to examine why many mortgage holders are being charged rates well above the cash rate record low of 0.75%.
The higher rates have prompted allegations of price gouging by the banks - Commonwealth Bank, Westpac, ANZ and National Australia Bank - which have previously cited funding costs as a reason why not all reductions could be passed on.
Rod Sims, chairman of the Australian Competition and Consumer Commission, said at a media conference that a mortgage was the "most important" financial transaction most people would ever make.
"We want to make sure that the customers, consumers, community, really understand exactly how banks make their decisions, why they make their decisions," he said. "There is often a lot of confusion amongst customers in relation to the big difference between the headline rate, the standard variable rate they see, and what people actually pay."
The ACCC would investigate why banks set rates where they do, and make them more accountable for those decisions. It would also try to make it easier for consumers to switch banks to get a better rate. Sims said they should become "active players" in the market rather than signing for a mortgage and then not reviewing the terms until it is paid off.
"I think you are better off being an active player in the market if you are a consumer and hopefully the work we do will give consumers more information about how to engage with the mortgage interest rates markets," he said.
Frydenberg shrugged off suggestions that the new inquiry, which will also include smaller institutions, would further affect confidence in Australia's banks, after the royal commission into banking standards lifted the lid on an array of misconduct.
"I actually did call the CEOs of the big four banks yesterday and told them that this could actually help clear the air," he said. "But at the same time, you know, they're defending their patch and will continue to do."
The treasurer said the banks need to explain how they balance the competing needs of shareholders and customers.
The official cash rate is at a record low of 0.75% after the Reserve Bank of Australia cut interest rates three times this year. But the big four banks on average passed on only 75% of the total reductions to their customers.
"There are a number of smaller lenders that have actually wasted no time in passing on these rate cuts on in full," Frydenberg said.
"If the big four banks had passed on these 75 basis point rate cuts, then somebody with a $400,000 mortgage would be more than $500 a year better off in lower interest payments." ANZ chief executive Shayne Elliott said on Monday banks had not properly explained why they have not passed on Reserve Bank rate cuts to mortgage customers, welcoming the competition watchdog's inquiry.
"The inquiry is a good opportunity to provide facts in what is a complex space and we hope it will provide the public with renewed confidence in the way their home loans are priced," Elliott said.
The ACCC's preliminary report is due by 30 March next year, six months before the final report.